Birla Pacific Medspa Ltd. (BIRLAPACIFIC) - Director Report

Company director report

BIRLA PACIFIC MEDSPA LIMITED
ANNUAL REPORT 2011-2012
DIRECTOR'S REPORT
To
The Members,
The Directors present hereunder the 4th Annual Report on the Business and
operations of the Company along with the Audited Statement of Accounts of
the Company for the year ended March 31, 2012. The financial results for
the year are summarized as under:
1. FINANCIAL RESULTS:
(Amt. in Rupees)
Particulars 2011-12 2010-11
Net Sales and Other Income 4,60,48,351 2,24,47,983
Profit/(Loss) before Interest,
Depreciation and Taxation (58,42,778) (3,30,94,246)
Less: Interest 17675 -
Less: Depreciation 98,61,273 1,12,47,374
Net Profit/(Loss) After Tax (1,57,21,726) (4,43,41,620)
Add: Balance bought forward (8,38,91,135) (3,95,49,515)
Balance carried forward to Balance Sheet (9,96,12,861) (8,38,91,135)
2. PERFORMANCE REVIEW:
The net sales and other income of the Company for the financial year 2011-
12 stood at Rs. 460.48 Lacs as against previous year Rs. 224.48 Lacs. The
Loss after tax is Rs.157.22 Lacs as against Loss after tax of Rs.443.42
Lacs of corresponding previous year 2010-11.
3. DIVIDEND:
Considering the financial performance of the Company for the financial year
ended March 31, 2012, your Directors regret their inability to recommend
dividend on the Equity shares.
4. SUBSIDIARY COMPANY:
The Accounts of the wholly owned subsidiary Company, Birla IVF LLP have
been received by the Company and a statement pursuant to Section 212 of the
Companies Act, 1956 forms a part of this Annual report.
PARTICULARS UNDER SECTION 212 OF THE COMPANIES ACT, 1956:
The Ministry of Corporate Affairs, Government of India, vide General
Circular No. 2/2011 dated February 8, 2011, has granted a general exemption
from compliance with Section 212 of the Companies Act, 1956, subject to
fulfillment of conditions stipulated in the circular. The Company has
satisfied the conditions stipulated in the circular and hence is entitled
to the exemption. The financial data of the subsidiaries have been
furnished under Annexure I to the consolidated notes' to financial
statement forming part of the Annual Report. Consolidated Financial
Statements of the Company and its subsidiary for the year ended March 31,
2012, together with reports of Auditors thereon and the statement pursuant
to Section 212 of the Companies Act, 1956, form part of the Annual Report.
The Annual Accounts and the related detailed information of subsidiary
company will be made available to the Members of the Company and subsidiary
Company seeking such information at any point of time. The Annual Accounts
of the subsidiary Company will also be available for inspection by any
member at the registered/head office of the Company and that of the
subsidiary concerned.
5. DIVERSIFICATION OF BUSINESS:
Your Directors thought it prudent to diversify and expand its existing
business portfolio from pure service business to a scalable product
business and need based medical services business such as to set up IVF
Centers, Integrated Wellness Centers, Sports Nutrition etc.
6. MANAGEMENT DISCUSSION AND ANALYSIS REPORT:
In terms of clause 49 of the Listing Agreement with the Stock Exchange, the
Management Discussion and Analysis Report is appended to this report.
7. CORPORATE GOVERNANCE:
Your Company will continue to strive to incorporate best of standards for
good corporate governance. As a listed company, all required measures are
being taken to comply with the agreement entered with the Stock Exchange
Guidelines and other statutory regulations. A separate report on Corporate
Governance along with a Certificate of Compliance from the Auditors forms
part of this report.
8. DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to the requirement under Section 217(2AA) of the Companies Act
1956, with respect to Directors' Responsibility Statement the Directors of
the Company state as under that:-
i. In the preparation of annual accounts, applicable accounting standards
had been followed along with proper explanation relating to material
departure;
ii. The directors had selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company at the end of the financial year and of the profit or loss of the
Company for that period;
iii. The directors had taken proper and sufficient care for the maintenance
of adequate accounting records in accordance with the provisions of the
Companies Act 1956, for safeguarding the assets of the Company and for
preventing and detecting fraud & other irregularities;
iv. The directors had prepared the annual accounts on a 'going concern'
basis.
9. DIRECTORS:
During the year under review, Shri Ramprakash Murlidhar Mishra was
appointed as an Additional Director of the Company with effect from May 25,
2012. As per provisions of Section 260 of the Companies Act 1956, such
director holds office only upto the date of forthcoming Annual General
Meeting of the Company. The Company has received notice proposing Shri
ramprakash Murlidhar Mishra as candidate for the office of Director
pursuant to Section 257 of the Companies Act, 1956.
Shri Venkateswarlu Nelabhotla tendered his resignation with effect from
August 9, 2012 as Director of the Company.
Shri Mohandas Shenoy Adige and Shri Anoj Menon Directors of the Company,
retire by rotation and being eligible at the forthcoming Annual General
Meeting, offers themselves for re-appointment.
10. PUBLIC DEPOSIT:
Your Company has not accepted any fixed deposit from the public. As such,
no amount of principal or interest is outstanding as on the Balance Sheet
date.
11. AUDITORS:
M/s. Kanu Doshi Associates, Charter Accountants, the Statutory Auditors of
the Company, retire at the ensuing Annual General Meeting. They have
confirmed their eligibility and willingness for reappointment. The
Directors recommend their reappointment by the Members at the forthcoming
Annual General Meeting.
12. AUDITORS REMARKS:
Auditors' Qualification Directors' Explanation
The Auditors have made a remark in The Board of Directors explanation
point no. 4(vi) of the Auditors' to this remark is that the
Report for the year ended March management has continued to defer
31, 2012 which states that the these expenses as it is felt that
Company has deferred the accumulated these expenses have benefit off
revenue expenditure of enduring nature to the Company and
Rs. 8,97,55,020 (previous period therefore the same shall be written
Rs. 5,56,38,638 plus current period of in the future years.
Rs. 3,41,16,382) being in the nature
of Brand Building Expenses which is
not in accordance with of Accounting
Standard 26 'Accounting for
Intangibles'. Due to the above, the
loss as reported by the profit and
loss account is understated by
Rs. 3,41,16,382 and reserve of the
company is overstated to the extent
of Rs. 8,97,55,020. Our report for
the earlier period contained
similar observation
13. PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND
FOREIGN EXCHANGE EARNINGS AND OUTGO:
The information relating to energy, technology absorption and foreign
exchange earnings and outgo required to be disclosed under the Companies
(Disclosure of Particulars in the Report of Board of Directors) Rules, 1988
is given in the Annexure 'A' to the Directors Report.
14. PARTICULARS OF EMPLOYEES:
During the year under review, there was no employee covered under the
provision of Section 217(2A) of the Companies Act, 1956 read with the
Companies (Particulars of Employees) Rules, 1975 as amended by Notification
GSR 289(E) dated 31.03.2011, General Circular No. 23 dated 03.05.2011.
15. HUMAN RESOURCE:
Your Directors place on the record their appreciation to the contribution
made by the employees at all levels who, through their competence,
diligence, solidarity, co-operation and support, have enabled the Company
to achieve the desired results during the year.
16. ACKNOWLEDGMENTS:
Your Directors take this opportunity to thank all investors, clients,
vendors, banks, regulatory authorities and wishes to acknowledge the
invaluable support extended to the Company by them. The Directors are
pleased to place on record their appreciation for the valuable information
made by the employees of the Company.
For and on behalf of Board of Directors
Place: Mumbai Dr. Abhijit Desai P.V.R. Murthy
Date : August 9, 2012 Managing Director Director
ANNEXURE 'A' TO THE DIRECTORS' REPORT:
Information under Section 217(1)(e) of the Companies Act, 1956 read with
Companies (Disclosure of particulars in Report of Board of Directors)
Rules, 1988 and forming part of the Directors' Report for the year ended
March 31, 2012.
A. Conservation of Energy:
During the year under review, efforts continued to conserve and avoid
wastage of energy in every possible way.
B. Technology Absorption: Research & Development:
1. Specific areas in which R & D carried out by the Company:
Not Applicable.
2. Benefit derived as a result of the above R & D:
Not Applicable.
3. Expenditure on R & D:
Not Applicable.
4. Technology Absorption, Adaption and Innovation:
Not Applicable.
C. Foreign Exchange Earnings and Outgo:
5. Activities relating to the exports, initiatives taken to increase
exports:
Not Applicable.
6. Total foreign exchange earnings and outgo:
(Amount in Rupees)
Particulars 2011-12 2010-11
Total foreign exchange earnings - -
Total foreign exchange outgo - 226,127
MANAGEMENT DISCUSSION AND ANALYSIS
a) Economy and Market Trends:
As per a study made by FICCI - PWC, the overall wellness market is
estimated at INR 490 billion and wellness services alone comprise 40% of
this market. Some of the key industry trends include:
* The growing wellness industry has attracted a large number of domestic
entrants and international players.
* Established players are pursuing revenue maximization through product and
service diversification and are exploring new global and domestic markets.
Franchising is emerging as a popular option for scaling up.
* Companies are actively seeking public and private equity investments to
fuel their growth.
* While there is strong optimism about future growth prospects, recovery of
investments may spread over a longer horizon than anticipated.
* There exists an opportunity for micro-segmentation to develop more
targeted value propositions for consumers and commercialization of
traditional Indian home remedies.
b) Road Ahead:
Paucity of skilled and trained personnel is one of the biggest challenges
in the industry today. However, their availability is a concern. Effective
monitoring of the industry is a challenge. Initial attempts at quality
accreditation have not been impactful. However, during the next three years
we estimate that the Indian wellness industry will grow at a CAGR of 20% to
reach INR 875 billion. Consumers and their needs will continue to evolve,
driving the transition from remedial care to a more holistic view on
preventive care. This augurs well for the wellness industry in India.
c) About the Company:
Our company, was incorporated on July 15, 2008 to carry on in India and
abroad the business of beauty and healthcare treatments, health and fitness
resorts, dieticians, yoga ashrams, saloons, hair and skin treatments,
Sanatorium centers, and to manufacture soaps consumables, oils, medicines,
body sprays and scents, creams, powders, natural and artificial skin and
hair conditioners.
In line with the above study, the Company offers a 'one-stop-solution' for
all cosmetic services under the brand name 'Evolve'.
Our Centers act as a single stop set up for beauty related medical
procedures in India which gives our company an edge over local unorganized
players.
d) Current Status:
While the company is currently operating its one stop cosmetic services
centers under the brand name 'Evolve', the business in 2011-12 at these
centers has not been to the company's expectations. The services offered by
the company are cosmetic and discretionary in nature and the business has
direct correlation with the disposable income in the hands of the consumer.
Most organized players have a mix of established centers and new outlets.
Achieving stable operations for a new centre (in terms of footfalls and
enrolments) depends on location, positioning, local competition, etc. and
varies between 6-36 months. Having achieved stable operations, payback may
vary between 2-4 years, depending on the type of service and business
model.
With the current economic slowdown, economic conditions prevailing in the
economy are unfavorable and after analyzing the performance of the existing
centers, the company is of the view that there would be a slack in the
business potential at these centers. Keeping in view of the slowdown in the
economy and the not so good customer response in the existing centers, the
management has decided to go slow in finalizing and opening of new Evolve
centers.
While exposure to western culture continues, Indian consumers remain
connected to their roots and traditions. Benefits of natural ingredients,
herbs and natural foods is ingrained in the psyche of most Indians and they
are considered 'safer' than their chemical counterparts. Recognising this
opportunity, companies have launched products and services with traditional
Indian practices, home remedies and ayurveda as their core proposition.
In the light of the aforesaid, your Company has adopted a cautious approach
towards utilization of the IPO Proceeds. As a result, the management has
devised new strategies which would not only complement its existing
business but also help the company in diversifying & expanding its business
portfolio.
As a risk mitigating strategy, the Company has thought fit to diversify the
businesses from pure service business to a scalable products business and
need based medical service business. With this context in purview, the
Company has decided to utilize its current proceeds of IPO under the
following new business segments:
Need based Medical Services:
1. IVF Centers
2. Integrated Wellness Centers Wellness related products businesses:
I. Sports Nutrition:
Others:
1. Acquisition of Company for alternative medicine viz. Ayurvedic, Unani
etc.
2. Ayurveda Medicine Products
With the initiation of above business, your company will truly convert
itself from its current pure cosmetic services business into a fully
integrated wellness company offering both products & services.
f) Internal Control Systems and their adequacy:
Your Company continues to remain committed to maintain high standards of
internal control designed to provide adequate assurance on the efficiency
of operations and security of its assets. The adequacy and effectiveness of
the internal control across various activities, as well as compliance with
laid down systems and policies are comprehensively and frequently monitored
by your Company's management at all levels of the organization.
g) Human Resources and Industrial Relations:
Your Company continues to lay emphasis on qualitative growth of its human
resources by providing congenial and constructive work environment, in
consonance with its belief that the real strength of its organization lies
in its employees.
Industrial relations were cordial and satisfactory throughout the financial
year.
h) Financial highlights:
a. Sales:-
Sales (net of Excise) during the financial year 2011-12 was Rs. 331.61 Lacs
as against Rs. 213.53 Lacs previous year ended March 31, 2011.
b. Profit/Loss:-
The net sales and other income of the Company for the financial year 2011-
12 stood at Rs. 460.48 Lacs as against previous year ended March 31, 2011
Rs. 224.48 Lacs. The Loss before tax is Rs.157.22 Lacs as against Loss
before tax of Rs. 443.42 Lacs of corresponding previous year ended March
31, 2011.
Forward Looking Statements:
Statements in this report on Management's Discussion and Analysis
describing the Company's objectives, projections, estimates, expectations
or predictions may be forward looking statements within the meaning of
applicable security laws or regulations. Forward-looking statements are
based on certain assumptions and expectations of future events and the
Company cannot guarantee that these assumptions and expectations are
accurate or will be realized. The important factors that could make
difference to the Company's operations includes the economic conditions
affecting demand/supply and price conditions in the domestic and overseas
markets in which the Company operates, change in Government regulations,
tax laws and other statutory and numerous incidental factors. The Company
assumes no responsibility to publicly amend or revise the forward-looking
statements or any loss to the investors in the shares of the Company making
investments relying on such forward-looking statements.